Garnaut Proposes Independent Climate Committee for Australia

Date

31 May 2011

MELBOURNE: Professor Ross Garnaut presented the Final Report of his Climate Change Review Update today at the National Press Club in Canberra. As well as the complete report, Professor Garnaut presented two supplementary papers: the first recommending a new set of governance arrangements for Australia’s potential carbon pricing scheme; the second outlining how the revenue from the scheme should be used for the next ten years.

Independent governance

Garnaut recommends establishing a new body to administer any new carbon pricing scheme, independent of government and vested interests.

The proposed committee, which would operate from 2014 onwards, would set and control the essential elements of the scheme, including emissions reductions targets, the size of an emissions cap and which sectors are and are not included. The committee’s recommendations would be legally binding unless parliament chose to specifically override them within 60 days.

The committee would be backed up by two other independent bodies. An Independent Carbon Bank would administer the emissions trading scheme, including assistance to emissions intensive trade exposed industries. Another body would review the necessary level of assistance to trade exposed industries after an initial three year period (Garnaut envisages that this might well fall under the remit of the existing Productivity Commission).

“Establishing a price on carbon is a challenging but crucial reform for this economy. These independent governance arrangements mean that critical decisions can be insulated from short-term political cycles, enabling the sort of policy continuity and certainty that business can work with.

“This is a prudent approach that is proving itself overseas - a similar arrangement in the UK is working well. The independent Committee on Climate Change’s (UK) recent recommendation of a 50% cut in emissions by 2025 has just been accepted by both the Conservative-led Coalition Government and the Labour opposition. ”

The ten year carbon budget

Garnaut also draws up a potential ten year carbon budget, which assumes a starting price of $26 a tonne, creating $11.5bn of revenue in the first year.

In outlining how that revenue should be divided up, Garnaut recommends that low and middle income households be given the majority of compensation to offset any cost impacts on family budgets, recognizing that “Australian households will ultimately bear the full cost of a carbon price.”

He starts by allocating 55% of all revenue to households - rising to 65% by 2021. This would be delivered by a combination of tax reform (ensuring greater efficiency in the system) and additional benefits payments.

Assistance for business and industry starts at 35% of total revenue, reducing to 20% by 2022, with electricity generation given 3% of revenue at the start of the scheme, falling to zero.

10% of revenue for the scheme (rising to 20% by 2021) would be set aside for innovation activities, with 5 – 10% allocated to fund carbon sequestration in farms.

Caroline Bayliss said: “The emphasis on supporting innovation in low carbon technology is particularly welcome. Strong support for research, demonstration and commercialization of new technologies will spur the creation of new profitable industries that will help reduce emissions, create jobs and bring about market transformation toward a low carbon future. We are seeing other countries, not least China, put huge strategic emphasis on clean technology – Australia cannot afford to be left behind.”

Note: Garnaut has assumed that the scheme will be more or less revenue neutral on the budget –with compensation coming in at between 105 – 110% of total funds raised, but also offset by existing innovation spending, which would be rolled in.